By now everyone is familiar with slow-motion trainwreck from the afternoon of January 25 (keep that date in mind), when America's premier financial Jerry Springer channel pitted one against another hedge fund moguls Carl Icahn and Bill Ackman (for those three people who missed it, here it is again). Which is why we won't waste time recapping it, suffice to say that as a result of the hour-long spat, both Ackman and Icahn left the screamathon hating each other more than ever.

In what may or may not be a totally separate event, we fast forward to January 29, or the following Tuesday, when JC Penney received a Notice of Default from the law firm of Brown Rudnick, representing an ad hoc group of bondholders of JC Penney's 7.4% of Debentures due 2037 and who supposedly hold more than 50% of the issue, which according to Bloomberg amounted to some $325.6 million outstanding ($400 million at issue), or about 11% of the firm's gross debt of $2.97 billion.

What happened is that one or more bondholders accumulated a sufficiently large stake in one of JCP's bonds to where they could throw the company into involuntary bankruptcy which would then accelerate payment on all bonds if a court found the bondholder claim to be valid, and which would destroy the firm's equity due to cross-default provisions between the various bond classes, if only bondholders had a sufficiently real pretext. Which they did.

Specifically, Brown Rudnick alleges that the company defaulted on the bond indenture when in January 2012 it signed a credit agreement secured by the company's inventory "without providing for equal and ratable security for the Debenture holders." JCP only disclosed this letter after the close today, when it concurrently filed a lawsuit in Delaware Chancery Court seeking to block the bondholders' efforts to declare a default, saying the Notice of Default was without merit. To wit:

the granting of a security interest in inventory pursuant to the Credit Agreement does not constitute an event of default under the Indenture. Pursuant to the Indenture, the negative covenant extends only to "principal property" -- which does not include inventory. Furthermore, the Company has never had any loans outstanding under the Credit Agreement, and because the Indenture only covers "indebtedness for money borrowed," the Company`s entry into the Credit Agreement would not have triggered the Indenture provision in any case. The Company has publicly disclosed for some 10 years that it has had various undrawn credit facilities secured by inventory with no bondholder allegations of violation of the Indenture.

A cursory read of the explanation provided by JCP's lawyers in response to the Notice of Default should make the JCP shareholders, all of whom would be immediately and massively impaired in the event the Involuntary Bankruptcy resulted in an official Chapter 11 filing, very nervous, since neither the "principal property" justification, nor the ridiculous excuse that the security stripping credit facility doesn't really count as it was never drawn on it, would withstand much scrutiny on cross before any but the most inexperienced of bankruptcy judges.

But what should make JCP stakeholders most nervous is that the man behind the ad hoc group may well be none other than the abovementioned corporate raider (and legendary Involuntary Bankruptcy mastermind) Carl Icahn, who is now hell-bent on making Ackman's life a living hell in the aftermath of the January 25 televized fiasco, and who will stop at nothing to crush and humiliate Ackman's hedge fund Pershing Square, which also happens to be the largest holder of JCP common stock with some 17.8% percent of the outstanding, or about $800 million worth of stock.

Note: we said may. Not is. Because we won't know for sure until Icahn confirm or denies.

Yet some things stand out.

First: the credit agreement was signed on January 2012: in other words, it had been in place for over a year. The fact that it was used as the reason for an involuntary bankruptcy filing only after the January 25 screamfest is very suspicious, especially since the defaulted indenture in question had been around since 1994. In other words, someone knew very well the leverage they would have by organizing an ad hoc group of debenture holders for a long time, and were merely biding their time for just the right moment.

Next: a quick glance at the TRACE activity in the 7.4% of 2037 shows that the biggest one day trading activity in the recent past was on none other than the abovementioned January 25. We would not be surprised at all if the bulk of said trading took the form of "wave it in" on the 47th floor of 767 Fifth Avenue.

But surely not even Icahn could promptly accumulate over $163 million bonds in a day (unless he had already been building up a stake), which is why he may have simply decided to collaborate with like-minded holders of the Debentures: either individuals who are seeking a prompt 20% take out (the bonds are trading at 84 cent of par), or simply to push the company into bankruptcy and use existing cash of some $500 million to satisfy bondholder claims, as well as to possibly take control of the company in a debt for equity. In both cases needing individuals who are not too fond of JCP, and certainly not fond at all of the Company's largest shareholder: one William Ackman.

A cursory look on Wall Street reveals quite a few funds who satisfy both criteria.

And finally, let's not forget that Icahn is one of Brown Rudnick's core clients, most recently representing the 76 year old billionaire in the case of Icahn against Trump Entertainment.

All of the above is, for now, conjecture, but it just fits too perfectly: the timing, the approach (so typical of the old school Icahn), and the target: because nothing would crush "retail expert" Ackman, who is openly feuding with Icahn over Herbalife, as a JC Penney bankruptcy. And nothing would bring greater validation to Icahn's claim that he "does not respect Ackman as an investor", uttered during the infamous January 25 debate.

We look forward to Mr. Icahn rejecting or confirming this hypothesis: the former case likely revealing who else is not a fan of Mr. Ackman's, while the latter pushing the Ackman vs Icahn soap opera to unprecedented and unseen before levels of inter-hedgefunder animosity, and shine even more light on the strange and confusing world where billionaires have so much money all they care about is destroying the reputation of those they perceive as their competition: a world in which ego is everything.

Of course, if we are right, and if indeed Icahn is behind this latest "Involuntary Bankruptcy" corporate raid, our sincerest condolences and best wishes to the JCP shareholders.

penney's new pricing scheme is horrendous, is this a joke or is this what the oligarchs do when they have some down time, if we arent careful they may dictate what you wear on an everday basis along with all the other things they took,,,,,,is there anything left but clothes?

Why does this have three down arrows? Anybody who watched the icahn/ackman "debate" knows icahn is a douche. Is icahn trying to curry favor here on zerohedge? What a smack. Ackman appears to have fucked with the wrong guy, that much is pretty plain. His analysis of Herbalife is right on, but that's not going to save him in this case....

My grandmother had that in needle point in the kitchen next to "may you be in heaven half an hour before the devil knows you're dead".

What should be interesting to watch is while Icahn is messing around with Ackman's crappy retail chain are the other business owners waiting for Icahn to finish depleting his energy and resources tilting at windmills. Et tu brute...et tu?

I saw them a few months ago - Pete walked off the stage at the end and left Roger to finish the show. </sarc

Yeah.... Who..... Anyone catch Jaime on Bloomberg today for over an hour taking questions in Miami. Amazing that building on Brickell Ave reflects all the canyons that devestated this country. He glowed about all the foreigners buying the property and all the immigrants that moved into the US and Miami. Nothing but softballs from the crowd and he opened it up to any questions. The best parts were calling legislation "Simpson Balls" and tellling younger people they should work till 70 or longer. (surprising Tyler did not link to it or follow up - plenty of sound bytez)

Just because it's bankrupt, doesn't mean it has to cease operations. Which is why a bankruptcy would have been the right procedure for Chitty-Chitty Bank, GM, Chrysler, Morgan Stanley, AIG, etc. etc. back in '08. Another positive is that the "suicidal management who got the company in trouble in the first place," to quote Gordon Gekko, get well and truly ass-reamed.

Bankruptcy tends not to do wonders for your equity share price however. And Ackman's fund is the biggest shareholder.

This kind of reminds me of 2005 when 150 yr old Kirk Kerkorian tried to impress his new girlfriend by making an out of the blue tender offer for GM stock, blowing the convertible bond arbitrageurs out of the water in the process.

Nothing rattles assumptions like when old wizards come out of their towers and start casting malignant spells.

I have no great love for Icahn but Ackman is a creep f*ck. I recall a REIT he did a number on. I feel sorry for the JCP shareholders, employees and bondholders. JCP is not a great store but it is as good as that crap store Kohls owned by that former Wisc Dem Senator'ss slimy family.

The Kohl's-another member of the 12 Tribes of Thieves. These leeches fight it out in public and then go to synagogue and have a good laugh over fucking the goys out of $ again and again-and then they wonder why they've been kicked out of every country in the civilized western world(save for their current host body-The USofA)

Yes, you can't really expect to be competitive in the retail sector until you evacuate every money-losing mall, cut your losses and go primarily to selling on the internet. Noone shops at malls anymore, yet I still see JC Pennys occupying 'mallstreet' in large numbers. Sears ditto. Heck, Sears still has these small sideshow outlets strewn all around town that sell lawnmowers, fix and repair refrigerators, washers and dryers, remanufacture weed eaters. Most that stuff you could find a great deal on at Craigslist or just go to harborfreight. The days of paying up for crap made in China are over. Whoever can sell the crap for the least amount of money wins. Brand name means squat when considering most everything everywhere is made in China.

The wealthy have to battle each other now since the 99.9% have few to no assets left. Been saying it for a while and it makes me chuckle that we get a front row seat to watch the fireworks on TV. Bring the popcorn and tune in for America's Real Dukes of Hazard.

JCPenney should replace one bull dyke spokeslesbo(Ellen Degenerate) with an even bigger bull dyke spokeslesbo(Rachel Maddow) and try to lose even more flyover country consumers. JCPenny's custom line of "StrapOns by Ellen" didn't go over too well.

why wouldn't they-Madison Ave advertising firms have the same east coast soddomite elite disdain for flyover country as Wall St and DC does. New Yorkers are pissed because it takes so long to get over flyover country to see their fellow immoral 12 Tribesmen in Hollywood.

Not so fast; so long as the debtor can offer adequate protection re the collateral the BK court can hold off any secured claimant. An open but long standing unused credit line is no immediate threat in the eyes of a BK judge; requiring no immediate resolution which will be delayed for months and years in hearings, rulings and appeals. No doubt the stock may tank; but this is just so much falderal that the BK judge will see thru. They are not creditor judges; they are bankruptcy judges - almost always favor the debtor in wars like this . BEcause the debtors are employers; and the creditors are just not that status. Besides a junior or senior bond can be taken out with superpriority financing approved by the court. The possibilities for treatment under a plan of reorganization of bond debt are endless. do not count Ackman out.

You beat me to the punch with the counterpoints to this shrill sky-is-falling piece.

People, even if you haven't read the bond paperwork and are unfamiliar with the applicable case law, use common sense - would a judge allow the company (and by extension, equity holders) to get ratfucked because of what's at best a small technicality? Falls under the highly complex and arcane section of bankruptcy code called "No Harmus, No Foulus".

For those who have convinced themselves that the "elite" are working together to enslave the rest of humanity, look (or listen) no further than this tape to see how they really behave amongst themselves. Schadenfreude is the name of the hill at Bohemian Grove,and everybody wants to stand atop it and raise his flag.

In the world of individual companies, this is what "heavyweights" can do over a Hatfield-and-McCoys style feud. Has nothing to do with JCP's business viability or P/E ratios or any of those things. JCP is "in play" now. Where it lands, who knows. I wouldn't touch it one way or the other, personally. This is a fight you don't need to show up for unless you really have an inclination.

Now please remember that politicians are at least as vindictive as these two sonsofbitches and have sway over a lot bigger realm than just a few companies here and there.

Is there anyone on Wall St with a more nefarious and tainted name than Carl Icahn? I struggle to think of one! I would love nothing more than to see him lose his shirt in this melodrama! Then we could be done with him -- FOREVER!

At great cost to himself, through the screamfest, Ackman showed millions of people that Ichan is a Class A A-hole. Attacking JCP this way confirms it for anyone that may not have been thoroughly convinced that Ichan isn't worth the price of the Saturday NYT. Of course that doesn't say anything for Ackman, either.

A characteristically disgraceful demonstration of Ichan's avarice is what he did to TWA.

I can swear there ain't no heaven, but I pray there ain't no hell. Swear there ain't no heaven, pray there ain't no hell,

If they would just take a couple billion or so of that money they just have laying around and buy physical silver for delivery, they would shove a precious metal stake into the heart of the banksters as the whole house of cards came tumbling down.

Guess they just want to settle for schoolyard fights with each other than wreck the world as we know it.

So what's on the next cable channel? Trump vs Maher in a battle of bets or Geraldo Live! Beyounce's other gig?

Joke of a thread. If Icahn wanted JC, he'd simply buy bonds in a premier creditor status. JC will collapse by itself.

If it was simply about vendetta and bankrupting a company because of a specific person, that is rediculous - a waste of time and money with more important things to do. You would also get the same satisfaction buying up the liquidation of JC in bankruptcy just by being a bondholder.

They did their little spat. That was for show. What they do financially is gonna be quite different. JC is going down just because it doesn't sell - nothing more and Icahn doesn't have to do anything.